Software localisation harder than it seems
Software companies have a point in asking GoI for changes to local value addition rules for public procurement. Software value chains are typically global with the intellectual property (IP) residing in one country, research being conducted in a second, and development happening in a third. Government local sourcing orders are broad, leaving nodal ministries to decide how to determine it.
The requirement that the IP reside in India can be circumvented by creative licensing arrangements. Royalties can be crafted to exaggerate the degree of localisation. Turnover criteria, too, are easily manipulated.
For cloud-based software, data localisation and processing provide guidance that can be muddied by extra conditionalities.
Preference to local vendors in public procurement of software is a non-tariff trade barrier to encourage domestic production. India is a big contributor to global software development being host research centres of a cross-section of tech giants. It is also emerging as a strong data host.
GoI's plan to speed up the process could be better served by incorporating local headcount, or contribution to global development, instead of IP or turnover as criteria for preferential treatment in public tenders. India has world-beating advantages in IT services that are a bigger draw for Microsoft and Adobe than its demand for software to improve public services.
Nodal ministries must help companies to evolve standardised self-certification criteria for local content. A harmonised approach will help vendors structure their business to be compliant with preferential bidding for public tenders.
